From the Fort Worth Star-Telegram March 14, 2013
Fort Worth investor Ed Bass and more than a dozen other landowners in southern Tarrant County have sued units of Chesapeake Energy in federal court in Dallas, accusing the Barnett Shale's second-largest producer of cheating them out of millions of dollars in royalties.
At issue is whether Chesapeake Operating and Chesapeake Exploration properly calculated royalty payments on the Oklahoma City-based company's natural gas production.
According to the lawsuit, the companies improperly deducted production costs, expressly forbidden by the leases, and used "sham transactions" with two other Chesapeake affiliates to set a below-market price on which royalties were paid, also a breach of lease terms.
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Chesapeake regularly cheats on their pricing and expenses. It has amazed me that they have largely gotten away with it particularly in the Barnett Shale area. Their gas price and expenses charged seem to always be out of line with the offset operators.
My feeling has been that they always figured that the royalty owners would not sue simply because the cost of hiring an Attorney on an individual basis doesnt justify the cost.
Not being an Attorney, I have wondered why some law firm doesnt take this up on a class action basis.
I would be surprised if there arent billions of dollars that Chesapeake has scammed from the lowly royalty owners.
Class actions are futile in Texas. The Texas Supreme Court has never upheld a class certification in the last 40 years.
Wade, I appreciate your advice.
Again, I want to state that I am not an Attorney which is obvious.
I get royalty checks from over 80 companies nationwide and have several leases with Chesapeake.
The product pricing with Chesapeake, as well as other added expenses on their royalty checks consistantly
result in probably the lowest net per barrel and mcf of all my operators. What could royalty owners as a group do to counteract this practice on their part.
The Bass suit to me is a statement that Chesapeake is abusing their royalty owners. I have always felt that they did so simply because they knew that the the royalty owners as individuals cant justify the cost of suing.
Any advice would be appreciated.
Find a good well, and get the owners together to file suit. It helps if they all have free royalty clauses. Is best to request an audit first before spending money on a suit.